TY - GEN
T1 - Asymmetric optimal hedge ratio with an application
AU - El-Khatib, Youssef
AU - Hatemi-J, Abdulnasser
PY - 2013/1/1
Y1 - 2013/1/1
N2 - The optimal hedge ratio (OHR) is an important tool for hedging against the price risk. A number of different approaches have been utilized in the literature in order to estimate the OHR, among others, constant parameter and time-varying approaches. One relevant question in this regard that has not been examined, to the best knowledge, is whether the OHR has an asymmetric structure or not. This issue is addressed in the current paper by mathematically proving that the OHR is asymmetric. Furthermore, we offer a method to deal with this asymmetry in the estimation of the underlying OHR. This method is applied to the US equity market using weekly spot and future share prices during the period January 5, 2006 to September 29, 2009. We find empirical evidence that supports the existence of an asymmetric OHR.
AB - The optimal hedge ratio (OHR) is an important tool for hedging against the price risk. A number of different approaches have been utilized in the literature in order to estimate the OHR, among others, constant parameter and time-varying approaches. One relevant question in this regard that has not been examined, to the best knowledge, is whether the OHR has an asymmetric structure or not. This issue is addressed in the current paper by mathematically proving that the OHR is asymmetric. Furthermore, we offer a method to deal with this asymmetry in the estimation of the underlying OHR. This method is applied to the US equity market using weekly spot and future share prices during the period January 5, 2006 to September 29, 2009. We find empirical evidence that supports the existence of an asymmetric OHR.
UR - http://www.scopus.com/inward/record.url?scp=84865484611&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84865484611&partnerID=8YFLogxK
U2 - 10.1007/978-1-4614-2317-1_19
DO - 10.1007/978-1-4614-2317-1_19
M3 - Conference contribution
AN - SCOPUS:84865484611
SN - 9781461423164
T3 - Lecture Notes in Electrical Engineering
SP - 231
EP - 237
BT - Electrical Engineering and Intelligent Systems
T2 - International Conference in Electrical Engineering and Intelligent Systems, (WCE 2011).
Y2 - 6 July 2011 through 8 July 2011
ER -